The GST Council has recommended a series of measures to speed up GST refund processing through automation, reduce manual intervention and provide greater certainty to taxpayers. The proposed reforms cover refunds of excess balance in the electronic cash ledger, refunds related to zero-rated supplies and refunds arising from an inverted duty structure.
The recommendations include automatic sanction of eligible refunds, reduction in the time limit for issuing acknowledgements or deficiency memos, and provisional sanction of 90% of eligible refund claims for zero-rated supplies and inverted duty structure cases under the first phase.
The Council has also proposed changes to refund application requirements, the calculation of eligible turnover for zero-rated goods, the minimum refund threshold and interest payable on refunds of pre-deposits made for filing appeals.
These measures are intended to make the GST refund process faster, more transparent and less dependent on manual scrutiny, while improving cash flow for businesses awaiting eligible refunds.
Official copy of the refunds-related reforms is as follows
Faster, system-based automated processing of refunds
The GST Council recommended amendments in section 54 of the CGST Act, 2017 and the relevant CGST Rules, 2017, to provide for system-based processing and sanctioning of refund claims, pertaining to excess balance in electronic cash ledger, zero-rated supplies, and inverted duty structure, in the following two phases.
Phase 1:
- Full refund claim of excess balance in the electronic cash ledger will be sanctioned automatically by the system, without officer intervention.
- Time limit for issuance of acknowledgement or deficiency memo to be reduced from 15 days to 10 days. Deemed acknowledgement by the system, where such acknowledgement or deficiency memo is not issued by the proper officer within 10 days of the application.
- For refund claims on account of zero-rated supplies and inverted duty structure, 90% of the amount claimed will be sanctioned on provisional basis automatically by the system, without officer intervention, on the basis of identification and evaluation of risk by the system.
Phase 2:
- System-based automated acknowledgment (without officer intervention) on due verification of the refund application by the system.
- In such acknowledged cases, automated sanction of full refund claim by the system (without officer intervention), in respect of claims pertaining to zero rated supplies, after adjusting pending dues, if any, on the basis of identification and evaluation of risk by the system.
For expediting and streamlining the refund process, the Council further recommended amendments in the CGST Act, 2017 and the CGST Rules, 2017, to inter-alia provide for:
- Amendment in refund application in FORM GST RFD-01, to capture the details in the said application in a system-readable format and dispense with the requirement of uploading scanned documents in case of refund claims pertaining to zero rated supply and inverted duty structure.
- Amendment in rule 89(4)(C) of the CGST Rules, 2017, to remove the restriction for maximum amount of turnover of zero-rated supply of goods, as 1.5 times the value of like goods domestically supplied.
- Amendment in section 54(14) of the CGST Act, 2017, to add an explanation that the threshold of Rs. 1000 shall be applicable in respect of total refund amount, i.e. the amount under CGST, SGST/UTGST and IGST taken together.
With a view to ensuring greater clarity and certainty on the interest payable on refund of pre-deposit paid for filing appeals, the Council recommended, -
- amendment in section 115 of the CGST Act, 2017, to make it a standalone provision in respect of the rate of interest applicable for the refund of such pre-deposit amount, and
- issuance of a circular to clarify issues regarding rate of interest on refund of pre-deposit.
These measures will streamline and expedite refund processing through greater automation and reduced manual intervention, thereby facilitating timely sanction of eligible refunds and reducing compliance burden for taxpayers as well as interface with the department. Introduction of automation will ensure transparency, certainty, and uniformity and will also improve cash flows for taxpayers.
CAclubindia
